City of Lino Lakes, Minnesota Financing Plan Highlights Citizens’ Charter Review Task Force

2. Pavement Management ReportFinancing Plan City of Lino Lakes, MinnesotaFinancing Plan HighlightsCitizens’ Charter ReviewTask Force Presenter: Terri Heaton, Senior Vice President March 29,2007

3. Background • TKDA hired during 2004 to complete an overall pavement management analysis including: • An evaluation of the condition of the current streets and • The costs to maintain / reconstruct them in order to maximize the useful life of these investments • The outcome was a Pavement Management Report (“PMR”)

4. Purpose of PMR Financing Plan • Determine a financing plan that is sustainable over the long-term • Allocate the costs of the PMR in a fair and equitable manner • Spread evenly all taxpayers • Specific costs to certain property owners • Spread based on utility usage • Identify non-tax revenues to finance the PMR • Maximize use of appropriate external financing sources • Minimize the utilization of City property taxes

5. Two Primary Cost Components • Maintenance • Costs related to the sealcoating and overlay of streets whose pavement life can be extended through on-going maintenance • Reconstruction • Costs related to those streets that have outlived their useful life so that pavement is in need of removal and replacement;

6. Total Estimated Cost of the Plan

7. Financial Tools Considered • Tax Levy on a pay-as-you-go basis • General Obligation bonds repaid from property taxes • General Obligation bonds repaid from special assessments • General Obligation Street Reconstruction bonds repaid from tax levies • Storm Water Utility to finance the portion related to storm water

8. Additional Financial Tools Considered • Tax Increment / Tax Abatement • Special Service District • Economic Development Authority • Capital Projects funds • Storm Water Improvement District • State and Federal Transportation Grants • Anoka County • Municipal State Aids (MSA)

9. Recommended Financing Sources • Maintenance Portion of PMR • Annual property tax levy for the maintenance portion of the PMR • Ongoing costs with ongoing revenues • Not capital in nature-not appropriate to bond • $330,000 estimated for 2005 with an average annual cost of $407,000

10. Recommended Financing Sources • Reconstruction Portion of PMR • General Obligation Improvement Bonds • Repaid by special assessments for reconstruction projects where the existing street width is inadequate • No less than 20% of the costs must be assessed to benefiting properties (not to exceed the special benefit to their properties) • Remaining amount would be repaid from a property tax levy

11. Recommended Financing Sources • Reconstruction Portion of PMR • General Obligation Street Reconstruction Bonds for reconstruction projects where the existing street width is adequate and where other elements not currently existing do not need to be added • Benefiting properties would be assessed an amount equal to the special benefit they receive • Remaining amount would be repaid from a property tax levy • Referendum is not required • Unanimous vote by City Council required and subject to reverse referendum

12. Recommended Financing Sources • Reconstruction Portion of PMR • Storm water utility to pay for those costs of the PMR related to storm water • Tax Increment Financing, Tax Abatement, EDA Levy and HRA Levy • Use is consistent with the City’s statutory authority • Rational nexus between the use of these funding tools and a development or redevelopment project

13. Recommended Financing Sources • Reconstruction Portion of PMR • M.S.A. should be used to maintain and reconstruct those streets designated as part of the City’s M.S.A. system • Pursue cost sharing opportunities with Anoka County for the reconstruction of C.S.A.H. routes within the City • Pursue State and Federal Grants

14. Recommendations Assumed the Following • Annual property tax levies for maintenance costs of the PMR (sealcoating and overlays) • No reconstruction projects meet the requirements for 100% financing with a G.O. Street Reconstruction Bond (all of the reconstructed streets will require widening) • The City specially assess benefiting properties 20% of the costs of reconstruction projects • The City establishes a storm water utility to pay for the storm water related costs of reconstruction projects

15. Property taxes for maintenance Storm Water Utility G.O. Improvement Bonds: Principal repaid from Special Assessments Principal repaid from property tax levy Total $4,077,038 $4,200,000 $3,500,000 $9,800,000 $21,577,038 Total Funding Sources 2005-2014Maintenance and Reconstruction

16. Projected G.O. Improvement Bonds

17. Projected Tax Rate Impacts

19. Projected Property Tax Impacts –$228,400 Residential Homestead

21. Storm Water Utility • Impact of utility fee not projected because of unknowns: • Make up of the customer classes • Basis of utility charges (i.e. impervious area versus customer classes) • Operational costs attributable to the storm water utility • Storm water credit system for on-site detention/treatment

22. Relationship of Financial Recommendations to City Charter • Charter requires each PMR reconstruction project funded by our recommended sources would need to be approved by a vote of the citizens • Creates an additional requirement the City of Lino Lakes must follow if the PMR is to be implemented – limits ability to ensure implementation of PMR • Unique charter requirement that we have not found in previous similar studies

23. Relationship of Financial Recommendations to City Charter • Where exceptions are made, allowing certain properties to be specially assessed without referendum, bonds are taxable as they provide a private benefit to those homeowners • Taxable bonds result in interest rates of 160 basis points higher than tax-exempt bonds • For example, 4.00% becomes 5.6% if the bonds are taxable • On $3 million bond issue, this costs an extra $465,645, assuming 15 year payback

24. Relationship of Financial Recommendations to City Charter • Funding sources recommended provide a method of financing widely used by most other cities in Minnesota • Implementing the PMR is in the City’s best interest • Increasing pavement maintenance and reconstruction spending to amounts we have recommended projected to result in net savings of $11 million over the next ten years

28. Conclusions • The PMR, if implemented, would save $11,000,000 according to TKDA • Separate maintenance costs from reconstruction costs and identifies appropriate sources of funding for each • The financing plan recommended provides widely used municipal financing practices for implementing a PMR • Sustainable over the long term • Subject to voter approval